Expect expert advice.

“Cash is King”, how many times as an Entrepreneur have you heard that? It is true, when you run out of cash - you are out of business.

You can make sure that your business survives by strategizing to ensure you are maximizing on all the corporate income tax deductions available and ensuring that you are aggressively monitoring and allocating your cash flow appropriately to grow that pile.

Many sole proprietors and partnerships use the strategy to incorporate their businesses because of the tax advantages that an incorporation will provide when their business has grown large enough for the incorporation to be worthwhile. The best known of these tax advantages is the Small Business Tax Deduction. Income of a Canadian corporation is taxed at a special “reduced” rate. The small business Corporate net tax rate is 11%. Other types of corporations that don’t qualify for the small business rate are taxed at 19.5%.

When is it worthwhile to incorporate? When you have a significant income that offsets the costs or expenses of the corporation, BUT you need to leave enough cash/revenue of your earnings to benefit from the corporate tax deferral.

Secondly, in order for businesses to strategize and ensure that they have all their tax advantages available to them - below are some opportunities to maximize on deductions for consideration:

Home based businesses can utilize the business use of home deduction and deduct a portion of many home related expenses, your property and your mortgage interest by comparing the time you spend in your home as an office and the amount of space that you utilize in that time.

Collect ALL your receipts that you spend money on – this includes the parking meter, the bag of coffee, the 10 pencils you bought, all those little things will add up at the end of the year. Account for ALL the money you spend on purchases that are business related. Ensure that you have the appropriate receipts to record and file to maximize on your business income tax deductions.

Your vehicle is viable to your business. Without vehicles you and your employees would have a hard time getting to work and your business might not be able to function. By planning ahead and preparing a strategy for your vehicles you will ensure that you are maximizing on the deduction and ensuring you increase your pile of cash. Remember to record your receipts and your kilometers so your bookkeeper & your accountant have all the information they require.

A convention provides you the opportunity to work on your business in an environment where you are not caught in the day-to-day life of managing your business. Critical aspects of your business are overlooked and you could be missing out on tax-deductible savings you could be enjoying. In fact, if you don't take the time to analyze your business you could be missing out on thousands of dollars in business tax deductions and the opportunity to increase that pile of cash.

Revenue Canada states that you can attend 2 conventions a year. What if I don’t have the opportunity to attend an organized convention? Now you can. Your intent must be business and you need to create an itinerary based on the needs of your business. Follow your itinerary; use pre-designed convention agendas for the different departments and needs of your business. Analyze, strategize and problem solve those areas of your business and you will ensure that you are not missing out on thousands of dollars in business tax deductions while you create a new perspective and strategy for your business.

Bookkeeping is often overlooked as an opportunity to maximize on business tax deductions. Why? Bookkeeping management of finances is more than merely harmonizing the bank accounting. The objective of any small business owner is to achieve success in both the marketplace as well at a financial level. However as easy as it may sound, it isn’t a task each one of you may be competent to accomplish. Your bookkeeper must ask the right questions from you, be able to communicate to you and your tax accountant, and understand their job description to ensure they are providing tax compliant bookkeeping.

For more information and tools to analyze your business, ensure proper bookkeeping and maximize on your business deductions to ensure your pile of cash keeps growing and you are the King, contact us today.

Record keeping is considered by many entrepreneurs as one of the "least important" part of operating a business (unless you are an accountant). However, good record keeping is essential to your financial survival. It also provides you the information paper trail tool to navigate through your records to uncover where the possibility of fraud is occurring or has occurred.

Reason #1:

If you have a business in Canada, The Income Tax Act requires you to keep records so that you can prepare complete and accurate tax returns. Keeping careful records of all your financial transactions is also in your own best interest for the following reasons:

· Good records help you to identify from whom you received your income. You may receive cash or property from many different places. Unless you have records showing sources of your income, you may be UNABLE to prove that some are non-business or non-taxable.

· Well kept records can mean tax savings since they serve as a reminder of deductible expenses. You may forget some of your expenses when you prepare your tax return unless you record them when you incur or pay them.

· Well kept records can prevent most of the problems you might encounter when your tax returns are audited. If you records are so incomplete that your taxable income cannot be determined for them, taxation auditors will have to use other methods to establish income. This could be very time consuming and inconvenient for you; it could also be your disadvantage if your records do not support your claims.

· Your records will keep you better informed about the financial position of your business. Statistics derived from proper records can tell you what is happening with the business. An analysis of these statistics can help lead you to the reason why.

Successful use of records can show you:
trends on what is occurring in your business
allow you to compare performance on past budgets
assist you to prepare future budgets

· Proper books and records may help you to obtain assistance from banks and other creditors. Not only will your books and records give accurate information about your current financial position, but they will also show that you are constantly aware of what is happening within your business.

Therefore, keeping good records requires more than just knowing which records to keep and for how long. It also includes setting up systems and maintaining records in a way that makes it easier for you to monitor the progress of your business to track business is improvement, which items are selling and changes that are required – knowing how best to keep records can be the difference between the failure and success of your business.

Reason#2:

Businesses are now finding it vital to their continued success to implement measures of protecting themselves against corporate fraud. Preparation is the key to making sure that businesses are ready to handle a situation of corporate fraud. Businesses need to recognize that taking due diligent measures to ensure that those who handle your records and provide record keeping services have established credibility through third party verification of an absence criminal record and verification of professional memberships and designations. Utilizing companies like IHonest who specialize with third party verification are vital.

If businesses are recognizing that corporate fraud is prevalent within their own companies and they are taking measures within like: finding out as much as they can about the business they are dealing with, and then applying the right amount of common sense, they prepare their business for protection against fraud.

But, what about ensuring that the professionals they deal with have proven that they are qualified and skilled but what about their credibility and background. Does a former employee or professional who providing a testimonial/reference make them instantly credible? No, what that testimonial/reference says is that professional provided a quality service.

The Ottawa police department sates that their investigators not only investigate corporate fraud that are financial institutions but also commercial businesses and professionals.

These are the questions that the Ottawa Police Department ask:

“What should I do if I uncover a fraud situation in my company?What should I do if a company that I have dealt with has defrauded me?

The answer to the above questions is the same -document, document, document!

Corporate fraud investigations are quite extensive and often very complex. It is important that you gather as much documentation as possible to be included in your police report. It is important to know where your documentation came from and what value it has for investigative purposes.

A statement or summary must accompany your documentation to explain what has happened and why you believe a fraud has occurred. Your documentation must be in some form of order and not simply gathered together in a random fashion.

You MAY be required to provide a forensic audit at your own cost. The Ottawa Police Service does not provide this service. Your file will be reviewed and discussed with you first before any such request for an audit is requested.” Ottawa Police Service

Now we have a police department telling us; document! Therefore, proper record keeping is vital.

What does the Ottawa Police Department say about prevention of fraud. Well they tell us to “do your homework!”

Imagine you own a business and the professional you hired to handle your record keeping has misappropriate of cash or inventory, or conducted fraudulent financial reporting? You find out in the investigation that this professional was charged Under the Criminal Code of Canada, Section cc. 380.(1) and you did not complete due diligence …

Many companies think they have satisfactory measures in place for protecting their intellectual property through data access. These may be in the form of passwords, biometrics, file encryption, non-disclosure agreements, firewalls, anti-virus, intrusion prevention and employee training. The reality is however is that most companies have no idea where their intellectual property is really going. In most cases, straight to the competition and providing them a leading edge with your material, idea or product.

Intellectual property theft is different than the theft of physical property. Instead, it involves stealing or misusing proprietary information a company (or person) owns. Examples of intellectual property include copyrights (which protect things such as written material, audio or video recordings, and even computer code), trademarks (which protect things like a company name, product name, logo, slogan, or package design), trade secrets (like a restaurant's secret recipe), and patents (which protect inventions or discoveries, like the composition of a new medication).

Why is intellectual property important?

Intellectual property protection is critical to fostering innovation. Without protection of ideas, businesses would not reap the full benefits of their inventions and would focus less on research and development. Similarly, artists would not be fully compensated for their creations and cultural vitality would suffer as a result.

Why should I protect my intellectual property?

Piracy, counterfeiting and the theft of intellectual property assets pose a serious threat to all businesses. Exporters face unfair competition abroad, non-exporters face counterfeit imports at home and all businesses face legal, health and safety risks from the threat of counterfeit goods entering their supply chains.

What about those companies that are seeking your intellectual property by means of deception?

You are asked to ‘help’ and instead you are creating a database of knowledge for the competition to further their development without you even realizing what you are doing.

As a business owner I ask these questions and so should you:

1. 1. If someone wants everything for free it must have value?

2. 2. When I provide free information what am I providing?

3. 3. Who am I providing this information too?

4. 4. What is their intent with this information?

Due diligence is required by ourselves to ensure that we know who we are doing business with and we are comfortable providing the information to that individual or company. Next time your intellectual property is questioned make sure you ask yourself the above 4 questions and you have the answers.

According to FBI, Interpol, World Customs Organization and International Chamber of Commerce estimates, roughly 7-8% of world trade every year is in counterfeit goods. That is the equivalent of as much as $512 billion in global lost sales. Of that amount, U.S. companies lose between $200 billion and $250 billion. IP theft has a major impact at home, too: according to the U.S. Chamber of Commerce, overall intellectual property theft costs 750,000 U.S. jobs a year.

According to the Harvard Business Review – ‘the law is often not the best defense against the theft of intellectual property. Far more effective in such cases are market-based strategies that keep pirates in port.’ Read their protection idea’s and suggestions.

Yikes, your company has been forgiven a debt… That could mean you have income and gst to report unless you designate the amount was initially an equipment cost and reduce the asset value.

There are extremely complex rules dealing with situations where taxpayers who have commercial obligations (debt) and that debt is settled for less than the principal amount. If the debt is personal or non-commercial in nature, nothing happens. In these cases, the debt is defined to include debt where the interest is not deductible for income tax purposes. Commercial debt is debt where interest is deductible for income tax. To be deductible, it must have been incurred to earn income from a business or property. However, even in cases where the debt was non-interest bearing, the debt forgiveness rules apply where interest, if paid or payable, would have been tax deductible. Where commercial debt is forgiven, the forgiven amount is subject to certain special tax treatment.

Rule of 9If you have un reconciled balance - If the variance is dividable by 9, likely a number reversal – you have input 11 instead if 21
Example
11 or 21 = difference of nine
17 or 71 = difference of 54 (divided by nine)

A rule stating that in order to find the number of years required to double your money at a given interest rate, you divide the compound return into 72. The result is the approximate number of years that it will take for your investment to double.

To determine how long it will take to actually pay or receive interest on any principal amount equal to the principal amount - divide 72 by rate of interest.
1% interest = 72 years to see you double your investment.
Or you doubled your mortgage cost.

The Honourable Jim Flaherty, Minister of Finance, and the Honourable Gail Shea, Minister of National Revenue, today highlighted that, as of January 1, 2012, Canadians will have a new $5,000 of room to invest in their Tax-Free Savings Account (TFSA).

Others will sense if you believe in yourself. Have you ever been talking to someone that you first met and they fumbled while they talked and provided no direct eye contact and seemed nervous? I think we all have had that conversation at some point in our business career. That confidence or lack of is what will either persuade a potential new client to believe in you and your service or your product.

Not being able to believe in yourself will work against you and actually hinder your abilities. Lack of self-confidence can be a wedge between you and the successful, profitable business that you’re striving to create.

How do you overcome?

It is very simple, you need to find creative ways to boost your self confidence. It won’t happen overnight and it won’t happen without working at it. Remember, if you take baby steps forward eventually you will be running your way to success.

1. When you wake up in the morning look in the mirror and introduce yourself to your self. Take a look at what others see and if you don’t like what you see change it until you are happy with your simple introduction.

2. Approach a complete stranger in the supermarket or in the shopping mall and try to strike up a conversation about something that you both have in common at that very moment – “Hi, I can’t get over how busy it is today and they only have 2 people at the till?” Did they strike you down with a bolt of lightening? Did the earth fall our from under you … No. Try it again and again – it will get easier every time.

Your homework - Think of creative ways to approach people and build one step at a time!

If you have the finances; research an expert like a business coach an hire them. Their sole priority and expertise is to teach you to become the confident professional business person you strive to be.

Remember you are your biggest asset in your business and you can empower yourself with confidence to achieve that success you are looking for.

Bookkeeping is something as a business owner we all face and need. It is recession proof and a necessary evil! As a business owner we are so busy trying to make money that we forget that our bookkeeping can be our Secret Weapon to keeping our money.

Good bookkeeping leads to good business management and growth!

Below are 5 common mistakes made by bookkeepers:

1. They do not account for claiming meal receipts and not identifying it in a meal ledger such as a meal & entertainment, meal travel, meal – living out allow, meal – isolated living, etc.

The government tax department believes a consumption of a meal is part personal. Although for business expense the meal and the gst paid is 100% deductible by the company. The Tax claim of the meal expense and the gst on the meal has to be reduced by 50% when prepared for tax purposes.

In unusual incidents a meal claim for an “isolated” work site, you may claim 100% of the meal expense and 100% of the GST expense.

2. Claim receipts as a business expense that actually have some personal use by the employees or owners.

It is not uncommon to have to discuss lifestyle related expenses and determine if any part of the expense is business related.

Travel and vehicle are likely ledgers that may have some personal portion that may have to be deducted and or taxable to the employees or owners.

3. Claim an equipment purchase as an operating cost.

The popular mistake is inputting a computer purchase under office expense. Because a computer provides more than one years use for the business as all equipment purchases, this expense must be claimed as an asset on the balance sheet rather than on the income and expense.

4. Without Obtaining confirmation on the use of vehicle in the company, specifically when claiming a vehicle with an over $30,000 purchase cost you may be claiming to much GST and when the taxes are prepared the actual asset listing of that vehicle may have to be reduced in value to $30,000. Although for business expense the vehicle and the gst paid is 100% deductible by the company. The Tax claim of the vehicle purchase and the gst has to be reduced by the $30,000 threshold when prepared for tax purpose. When a vehicle is used for a passenger vehicle, the amount eligible is restricted to $30,000 for tax purposes.

5. Not Collecting GST on every sale within a GST registered company, cause you suspect gst is not a consideration, doubt that belief, collect gst.

Selling a company used computer, used vehicle to any one, the owner or an employee is considered a taxable sale and gst is collectable.

C2online specializes tools for business owners to ensure they maximize on their deductions.. go to our categories and feel free to browse .. if you have any questions just contact us!